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provide equipment or substance or training the rebel groups operating against the leaders of a neighboring state. this is one of the problems that we face today with the m23. it is also a problem that we face with the allied democratic forces. this is incumbent upon all of them, incumbent upon every state in the great lakes to do this. if we could get that, we could cut awful lot of the support for rebel groups. with respect to the allied democratic forces, indeed, they have been operating in north come in the eastern part of north eagle, against the
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ugandans. the government of the democratic republic of the congo needs to do everything that it possibly can to not allow groups like this to continue to operate out of and from their territory. i'm not in any way accusing them of aiding and abetting, but the mere fact that they don't have security and control of the territory effectively allows this to go on. but it needs to stop. clearly needs to stop. third point with respect to the leader of the allied democratic front, we have, in fact, sanctioned him. we have imposed both visa travel
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and financial sanctions on him in response to the very criminal things that we know that he is responsible for doing. spent ambassador, thank you very much, and thank you for all your work on the ground. in africa, with these groups, i know as things were unfolding in eastern congo, you were there trying to influence the course of events. we appreciate that. i yield back, mr. chairman. thanks very much. >> let me ask just two final questions of this man. together final question, please fire way. again, in your testimony he your testimony he made very clear there's credible evidence, body of evidence that corroborates key fines of the group of experts, including evidence of significant military logistical support, as well as operational and political guidance from the rwandan government to the m23. i know on your most recent trip to work preclude the opportunity
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meet with the president of rwanda. did the officials with whom you met with, did they meet, i should say, it's a dispute that? and went secretary sherman met with the president, some months back, several weeks back, did she get a report back from him? did he tell her this is all rubbish, not true? or did he admit to anything? secondly one of my most disappointed waste today, and marino i think are you out further on the suspension of foreign military financing that we're talking about on $200,000, when the 2006 act at least envision a more robust and credible sanctions against the country that is aiding and abetting that there is organizations like m23. so if you could speak to whether or not additional sanctions are under consideration at least against rwanda, and specific individuals as well.
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>> mr. chairman, let me ask, answer the first question. you were correct, as i stated earlier, i and my british and french colleagues met for several hours with the president, and we met for an extended period of time with the other president has was the foreign minister and prime minister. it is regrettable that president kagame chose not to meet with us. the message about our concern, again, not just those of the united states but britain and france come we traveled there as the t-3, three permanent members
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of the security council who have worked together on many issues. but we did speak with the foreign minister, plus some of her colleagues. again, we raised the issue of the need to and outside support. as in previous discussions, the rwandan government strongly, vehemently denies that it is providing any assistance to the m23, and it has not taken the steps of publicly denouncing on a bilateral basis the m23.
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so we have raised this, and it's important that we continue to monitor this as others in the international community do on a very, very close basis. with respect to your second question about international support, or at least our bilateral support to the rwandan government, i start with what i said to congressman marino earlier, is that they utilize their international assistance, not only from us in particular, but others very, very effectively and to use it with great integrity. people get it. we are not providing any cash or
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check transfers. it all goes through international organization and donor groups that work with the government. we don't think there's a level of fungibility, and we do not believe that the money is being misused or misdirected. we focused on the military because that's where the issue and the problem derives your i know that a number of european governments have suspended large amounts of funding to the rwandan government, but they handle their resources differently. in most instances, they're making budgetary transfers that are cash payments, checks to the government. we don't do that. so it's a very, very different thing. our desire is not to hurt the
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rwandan people. our desire is not to cut them off from essential support for agricultural education or health programs. our real desire -- >> ambassador, but sanctioning individuals within the rwandan government would not in any way hurt individuals, and, frankly, the argument you're making, i served on the spam and begin my service o on the spent my second term in 1983. and voted in favor of sanctioning south africa. and there were people who said he will hurt innocent people if you do so. but sometime the egregious harm is so compelling that a very strong statement needs to be made. but minimally i think we would want to session individuals in the rwandan government. >> mr. chairman, i've heard your request and your concerns. >> thank you so much,
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mr. ambassador. i'd now like to ask our second panel to make their way to the witness table to begin first with steve hege, who has worked on -- were you served for three consecutive mandates as the armed groups expert at the united nations group of experts on the drc. he investigated and co-author six public reports, submitted and presented to the u.n. security council, sanctions committee. during the recent expire 2012 mandate, he was also the coordinator of the six member team working under security council resolution 2021. prior to joining the group of experts, mr. hege worked with several humanitarian entities keeping peace building organizations. we will then hear from john prendergast who is a union rank activists, best selling author and cofounder of the enough project. in addition to end genocide and crimes against humanity. has worked for the clinton administration, state department
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and in congress. is also worked with the national intelligence council, human rights watch, international crisis group and the u.s. institute of peace. he has helped fund schools in darfur in refugee camps, now belongs to a satellite project with george clooney. mr. prendergast has worked for peace in africa for well over a quarter of a century. then we will hear from mvemba dizolele, who is a visiting fellow at stanford university's hoover institution, and professor, lecture and african studies at johns hopkins university school of advanced international studies. mr. dizolele has testified several times before the congress. his work has appeared frequently in many major news publications, and he is a frequent commentator on african affairs on television and radio. he served as election monitor in the drc in 2006, and again in 2011. and has also been indicted with united nations peacekeepers as a
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reporter. in addition, he is a veteran of the united states marine corps. thank you for your service. and i'd like to now go to steve hege. >> chairman smith, ranking member bass, and members of the subcommittee on africa's global health and human rights, thank you for this invitation to testify at the scene on the current crisis in eastern congo. i have been working on the kabul for over eight years, including the past three years as a member of experts. the group of experts mandate recent expire on 30 november, during which i service court in over six member team. as such i'm no longer actually with the united nations. interviews today i share today do not reflect the group of experts, but rather strickland my personal perspectives. the group of experts is a security council mandated which reports to the council sanctions
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committee. its role is to investigate, document and inform the sanction committee of violations to united nations arms embargo on nonstate actors in the drc as well as related issues such as illegal trader natural resources and serious violationviolation s of international law including the recruitment and use of children. during the course of the previous mandates, the group found that since the very outfits of the m23 build million, the government ever one has provided direct military support to m23, this is a recruitment, anchorage desertions from the congolese army, and delivered arms, ammunition, political advice intelligence to the rebels. at the strategic level rwanda has spearheaded fundraising and membership drives for the political cadres, even nominating the movement political leadership and directly instructing them of their demand to be made before the congolese government. the rwandan army is not only set up an elaborate recruitment networks within wanted to ensure its steady supply of new troops to m23 including children, but
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they have also integrated their own officers and trainers within m23 sachin commit on the ground in north. during all major -- during all major military operations, the rwandan army has deployed thousands of additional troops to reinforce m23 and the principles attack such as the recent offensive on goma. while members of the international committee has expected rwanda -- in light of mladic and financial pressure, the group has found such direct involvement has only increased with time. precisely because m23's de facto chain of command culminate the minister of defense of rwanda. nevertheless,, the comment of rwanda continues to deny any involvement in annex three of our final report we respond to each of the criticisms. however, went its arguments proved unconvincing, rwanda turned to attacking the group of experts claim bias and even
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orchestra in a campaign saying that i was a sympathizer. in addition to rhonda backing m23, in our final report our final reports the group document support for the rebels from important networks within the government of rwanda. senior officials provide the rebels with direct troop reinforcement in congolese territory, weapons deliveries, technical assistance, joint planning, political advice and facilitation of -- they also support the creation and expansion of the political branch of m23 base, even before the president had ever authored any interaction with robespierre the represent a knows the type of support.
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throughout our mandate the question was often posed to was quite natural and logical, why ask why would rwanda undertake such a risky and politically dangerous endeavor? though it is not the work of a group of experts to establish causes or drivers, i will humbly attempt to analyze some of the stated motives behind this war beginning with m23's key demand. since the rebellion's initial stages, m23 has been an assortment of demands and justification. first the rebels have claimed the government reneged on the 23 march 2000 peace agreements. nevertheless, in reality this accord was potentially an afterthought. for many within the m23 the
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integration into the congolese army was nearly a tactical move but never constitute a fundamental alteration of their objections. the short-term deal with generous to rwanda. the congolese officers, particularly in rwanda and its own officers who took control over much of the army in eastern congo. paradoxically the rebels have also complained of a pervasive corruption within the congolese army. nevertheless, as the most powerful commanders in the drc, they were some of the worst perpetrators of racketeering. moreover, the rebels have claimed discrimination of the officers within the army and the killing of the former officers within redeployed outside. while certain historical animosities cannot be denied, dozens of senior officers and over four-fifths have chosen not to join the rebellion. in recent months m23 is
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increasing claim they want to redo the discredited 2011 presidential election. nevertheless, a political party had in fact join the presidential electoral line and many top m23 commanders order should massive fraud on his behalf. if it's not nearly the claims of the march 23, 2000 agreement or good governancgovernanc e, human rights, then what does one do really want in this crisis? despite paranoid about balkanization which is been so prevalent for many years amongst the congolese population traumatized by multiple foreign invasions, only one of the rebel demands has any lasting explanatory power, that is federalism. rwanda orchestration of the m23 rebellion comes more comprehensible when understood as determined and calculated drive to spot the creation of an autonomous federal-state for the eastern congo.
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there has been speculation over whether rwandan involvement was driven by security interest, economic interest, or cultural sides. but a federal-state eastern congo would encapsulate all these issues. in november 2011 election, one of the most senior rwanda and intelligence officers argued that because the congo was too big to be governed, rwanda should support the emergence of a federal-state for eastern congo. he told me, should relate in the same way that cuba was linked to khartoum in reference to sudan. during our official meetings with rwandan governments in july, the rwandan delegation consistently stated out investigations were simply a distraction from reaching a definitive solution for governance and eastern congo. when pushed further, several representative not hide the fact that the only solution they had in mind was indeed federalism. not surprisingly, rwanda had open from aided and abetted so
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as to set the bar high enough. during several interim meetings of m23 for mobilization, senior government officials including the minister of defense special assistant openly affirm that establishing this state was, in fact, the key goal of the rebellion. one m23 spokesperson recently stated in "the new york times" we want more than decentralization. we want federalism. the eastern parts of the congress interests are in eastern africa. even senior ugandan security officials also acknowledged this was the aim of the rwandans in this m23 were. one officer who was himself involved in supporting m23 in cooperation with the rwandans told us they are thinking there. need to look at south sudan. this objective also explains why rwanda have consistently sought -- as one single united credible front against each other. and repeatedly calling the congo
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a big black void in the congolese state as fictitious. a federal autonomous state system would cement a guaranteed rwanda's already influence over military, political, economic and cultural aspects of life. the government of rwanda is given great credit since the -- to rebuild his country with unmatched progress. however that same determination has led rwanda's leaders to erroneously adopt its inherently destabilizing long-term geopolitical strategy for the eastern drc. so if rwanda's geopolitical aspirations are indeed as i suspect so ambitious, and what can we expect from current negotiation, particularly when rwanda has demonstrated in recent weeks that it has the upper hand on the battlefield. for his part, president -- but talks will falter unless the key
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issue of federalism is put front and center on the negotiated agenda. will the u.s. and others in a nation can support a federal solution for the eastern congo with full knowledge this is likely rwanda's primary objective in the first place? stepping back from the current dynamic, federalism in and of itself is neither inherently a good or bad proposition, but when driven by a neighboring state which would benefit enormously from it, federalism can be problematic to say the least. diplomats commonly affirm that rwanda can and must be a part of the solution. which solution, i would ask? the rwandan solution for this crisis appears to have been identified well before the shots were even fired. thank you, mr. chairman for the opportunity to share the finest of the group. >> thank you for just one. now, mr. prendergast. >> thank you very much for your extraordinary commitment to the
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people of the congo, deeply appreciated by everyone industry but i can tell you i want to begin to bite at killing something you said, congressman smith, earlier in the hearing. no one is questioning the hard work and dedication the decades long commitment, the key administration officials have exhibited on behalf of peace in congo. i would particularly point out for special commendation ambassador johnnie carson and ambassador susan rice at the u.n. i'm particularly saddened by the personal attacks you've seen against ambassador rice in the blogosphere over the last couple of weeks over issues related to the congo. the washington shark cage has been fully activated, and because some people see blood in the water, but knowing johnny and susan and working with them for over the past 16 years i can tell you from personal expense they worked tirelessly for peace in the great lakes. reason the people, however, can disagree over tactics in over
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strategy. and it is in that spirit that it deliver my testimony today. i'm going to focus my remarks on issues related to the congolese peace process. throughout the latest of congolese congregation and previous conflict there, the root causes of war have not been addressed. leaving these peace processes, and -- to focus on flimsy power-sharing deals and arrangements that have undermined the sovereignty of the congolese state, professionalism and neutrality of the forces. this in turn has left the civil population of eastern congo subjected to globally unparalleled violence and impoverished youth. another unrepresentative agreement between powerful interest within the biggest guns that we may see coming out of this talks might open fighting momentarily but it lays a deeper foundation for further devastation and state
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deconstruction denver. the united states should not be a part to shut its a short term and destructive approach, and must alter its policy to avert an outcome that simply sows the seeds for further war. this year income and your leadership, i believe here in congress will be an important building block for the kind of step change we are seeking from the administration and the broader international community. here's the crux of it. the lack i think of a credible and effective and internationally mandated leveraged peace process addressing these issues in eastern congo is becoming a major reason for that war's continuation to the current negotiation between the government of congo and the m23 rebels is already making the same mistakes as its predecessor processes and will likely result in the same kind of short-term deal that keeps the congolese government in power, reduces international pressure on them from backing the m23.
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the root causes of structural violence will remain unaddressed, any agreement will lack the involvement of political parties, of representatives including women, and religious leaders, and local armed groups are present a diverse voices and interests of eastern congo. the time has come finally for a real international peace ever. the kind that actually has a chance of ending the deadliest war globally since world war ii. and the u.s. needs to help make that happen because if left sorts of the combatants and the regional sponsors, it will not. we believe that two key pieces of the solution are missing now. for a lasting peace, a process needs to address the fundamental root cause is rooted in economic and little drivers of war. first, the economic. a shared framework for the future must be agreed upon which the entire celebration of central -- congo first and foremost at the cynic in benefit
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much more from peaceful legal natural resource development rather than violent illegal extraction that exists today. section 1502 of the dodd-frank bill which is congress a row click passed in the face of a lot of industry money and lobbying, a certification effort, initiated by some of the forward leaning companies, electronics company who have started working in support of real change, all catalyzed moving in the right direction but more must be done to change the economic incentives for more peace. just as -- help incentivize peace in west african country. coupled with strong international investment, these efforts will create the conditions i think were transparent and effective government institutions. d. with economic roots of war, not only with moves the main driver, but creates the main engine for state reconstruction.
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second two politics, a political framework for congo must be agreed upon that restores public confidence and brings back the viability of the congolese state, while ensuring that further rebellion does not ensue. it's a political crisis as a result of the failures of the army and of the elections last year, and the talks with m23 alone will only erode his authority and provide further insult and injury to the congolese people. it is now time for a wider inter- congolese dialogue in which leaders of the government come from political parties, throughout civil society across congo actively participate and decide on a national consensus on reforms on key issues such as a political framework for the country, decent centralization, protection of minority, return of refugees and other issues that would be put on the table by the congolese themselves. i have five recommendations for strengthening u.s. policy, some
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which are echoing some of the good points that you al all of e congressional table raised earlier. first one and foremost i think he is the need to appoint this presidential envoy. presidential envoy to advise a presidential because it needs to have that kind of rank. the current u.s. policy structure simply doesn't allow the united states to exercise its leverage. it's creativity and the international coordinating function with respect to supporting peace in congo that we should be. if you appoint a presidential envoy, it helps to rectify those problems. the envoy should be a high level individual with experience in relationships in the region who will be responsible for developing a unified policy, step change would talk about towards the regional crisis to be able to fully invest come to help and deepened as political, this peace process to address the current gaping deficiencies. such an envoy we hope would leverage americans economic political and military influence
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to ensure that all parties fully cooperate with the international political process and work closely with the u.n. and the i clr. the second recommendation is one that everyone seems to before but it is not happen. that is to get a u.n. envoy out there as soon as possible. everyone is saying that they want this, including registered from ambassador carson, very encouraging. but it was in united nations security council resolution last week. the congressional letter that congresswoman has referred to earlier could be that her time in that regard. both of these envoys will be appointed only i think if the congress stays on this case and demands that we see these kinds of things happen. third recommendation again i'm echoing, we want to support robust united nations sanctions against the people. the international committee i think, this is too important for the peace process and for forward movement, we are leaving
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a huge reservoir of leverage on the table by not following the recommendations of the u.n. group of experts and others. there must be accountability for those of we started congo's war, and for those who are orchestrating for funding crimes against humanity and war crimes. as a responsible supporter of united nations sanctions regime, the united states should be compelled, pushed to oppose sanctions on all individuals identified in the u.n. group of experts. final report, and those individuals and entities that are supporting the criminal networks, the mafia networks, visit trade and natural resources. this won't happen i do not believe if congress doesn't continue to pound away on this issue. so i think progress in part is in your inspect the fourth recommendation i will put forward, and this was well articulated in the discussion i think between ambassador carson and the congress persons on the
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panel, we need to suspend certain u.s. assistance to any government supporting conflict and a stocking peace. that's military assistance for sure, but there's a certain categories of bilateral nonmilitary assistance, and particularly multilateral assistance not humanitarian aid to governments, whoever they are, who are supporting our conflict in eastern congo. now for example, if rwanda and uganda are found to be continued their support for m23 and are supporting m23 efforts to obstruct peace process, progress at the peace table, and corresponding measures should be taken by the u.s., other partner governments and multilateral organizations to which the u.s. contributes huge amounts of american taxpayers dollars. let's be clear about this. we don't want health and education and microenterprise comes small-scale assistance that goes to the people of rwanda to be stopped.
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that aid should be continued i believe, but the budget support and military assistance, those two categories of aid that are critical, and if the world bank, the world bank is $135 million on the table right now in budget support for the rwandan government. that should not be disbursed until we get clear forward movement on the peace process in congo. fifth and finally, and this one hasn't been discussed yet, but we would call for a high level summit on responsible investing in the great lakes. the united states in partnership with the union -- african union, could facilitate international investment conference on investing in peacetime rather than the conflict that exists today. in order to help expand the pie in the region for conflict resolution and for development, which all people of the subregion can benefit, particularly at the center, people at the congo. the summit could focus on developing market-based opportunities for responsible
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investment in congo and the region, again, you've got to turn to the -- incentives with the illegal extractive violent mining to peaceful legal development that goes into the tax treasury, into the treasury and funds development in eastern congo. bob hormats, undersecretary of state in the administration could be a kind of person who could help spearhead that, as someone who has helped build this public-private alliance that involves companies and the united states government and civil society, trying to help us promote responsible investment, spurred on by 1502 from the dodd-frank law. conclusion, my bottom one is this, two sentences. a credible internationally driven peace process that deals with the root causes and includes broader eastern congo civil society, both absolute to guarantee peace, but its absence, however, absolutely guarantees war.
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thank you very much. >> thank you very much indeed. mr. dizolele? >> chairman smith, ranking member bass, thank you for the invitation to testify before your committee. i come before you as a congolese and u.s. consensus and. the views expressed today, the statements are mine and mine alone. this important hearing comes as yet another critical time for the democratic republic of congo, and i'd like to commend you for your interest in my home country. condo is too big to fail. and u.s. should care today for the same strategic and security reasons which it did during the cold war. the u.s. is the equivalent of the world's breadbasket of critical resources. at this time of chinese resources, we cannot stand idle
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and let uganda and rwanda stabilize the heart of africa. human life, the cost of military adventure, which is indirectly killed over 6 million congolese, now rivals the holocaust. ironically, rwandan president blames others for the current crisis. substantial u.s. military assistance to rwanda and uganda, and washington's reluctance to denounce this, support for the regime's, make the use and accomplish -- an accomplice to the tragic. today, -- [inaudible] has made a confusing alphabet soup of names. rather, it is the lack of the thinning of the drivers and dynamics of the conflict that stands between policymakers like yourselves and to write prescriptions.
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for two decades the promise discord of the drc has been fined by a narrative, the ramification. such as ethnic identity, citizenship issues, sexual violence, international resources that ignores the root causes of the crisis. while the problem is often -- disaster, which is, drc is paralyzed by political crisis which requires clinical solutions. and that's where you can have the greatest impact. congo has been muddling through a series of crisis for nearly two decades. but causes of courses were not. [inaudible] no articulate vision, lack of capacity to exist or contain designs of neighbors. rwanda, uganda. armed groups -- [inaudible] u.n.
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peacekeeping mission. this cocktail of problems, short-term interest of the country's represent or in a long-term stabilization of congo and central africa. so the m23 rebellion is to be understood. as the crisis into a new phase to withdraw the rebels from goma, the people -- and a fellow congolese everywhere wonder if the storm has passed for the rebels -- quiet before the storm. easily, history indicates that the conflict will continue unless appropriate measures are taken. m23 like its precursor, and it doesn't armed groups roaming around on the expose congo as a
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dysfunctional state with week leadership and lacking the confidence army and security institutions. with the dating of this state, all grievances stemming from land disputes, democratic pressures, ethnic tensions and economic resources has turned eastern congo into a tinderbox. this means ambitious entrepreneurs and demagogues only need a cause and find a sponsor in the community, business, political elite to start a militia. that m23 which is primarily an ethnic armed group should explore -- [inaudible] one reason for the rebellion. but they fail to support from import and communities, such as -- who have so far refused to join m23.
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instead, they are serving with the drc army and fighting the rebellion. the rebellion also want to take over goma. but when goma failed m23 element, war broke out. announcing to protect the city and exposing even greater against the rebellion and the united nations. while it may be too early to draw many conclusions, m23 failure to rally would greatly present a common front may signal the beginning of a new era of trust building between ethnic groups after two presidential elections that empowered the congolese to seek change to the ballot, instead of
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against, m23 has no popular appeal. but the highly controversial and contested 2011 presidential state election, [inaudible] making it impossible for the government to mobilize at a time of crisis. m23 exacerbated the legitimacy crisis by exposing the state in the to protect its citizens. the government failed to be the professional army. throughout the most important single element, coveted natural resource. without such a competent military, drc is unable to stop the search. and said, the government of uss chosin to compromise and co-opt them with no disruption of the rank-and-file. the lack of an adequate military program has resulted in the establishment of structures and the national army. this means the militia which is
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a national army remains area of control and keep the command nearly intact. it allows -- [inaudible] and keep the access to local resources all under the protection of the congolese and military uniform. this model enabled disgruntled exes into the element to mutiny and launch m23. when drc ironically sought their commander. the predatory designs of neighbors rwanda and uganda, both have invaded congo twice. several human reports have linked both countries. and, of course, now they link to m23. both countries have denied the charges and insist that they are
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wrongfully accused in views as -- and just as scapegoats. their denial and deceit, however, undermines the chances of lasting peace. it is impossible to solve the crisis when the parties to the conflict refuse to assume the responsibility when you invade your neighbor twice, supports, looting resources and caused the death of six main congolese, you're not a scapegoat. you are a serious problem. so we know the primary supporters of the militias and whether they be in congo and neighboring countries or overseas, we often know the primary roots of explicit -- exports to which was to which neighbors profit from the so what should the u.s. do? number one, we need to unequivocally support reform. for the reasons we've heard
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today. from my colleagues and from the assistant secretary. reform is long overdue. but reform means serious commitment to rebuilding a new army and not coupling together all malicious in new units. millions of dollars has been invested in training but not enough attention has been devoted to the reconstruction of military. fortunately, these initiatives amounts to very expensive point of dressing. for instance, -- [inaudible] did not receive the institutions supporting them to succeed in their mission. u.s. africom has also trained unit which could make a positive contribution, if the leadership and the structure and different to the current broken nose restructure cannot absorb newly trained units effectively. real military reform requires us to break down the old decrepit foundation and build a new army
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from scratch. that process will phase out. we cannot put new wine into old faces. it will break. so number two, we need to implement u.s. law. and the congolese, yet many people in the world to come to the u.s. for support and leadership. so there is a law passed by then senator barack obama. we mentioned that already, democratic republic of congo security and democracy act. this bill would put -- sexual violence, sanction, and so far we have hardly scratched the surface of this law. it still baffles people. it definitely baffles the congolese. number three, we need to activate the state department. i think we need to encourage militia who are trying to get
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out of the system to turn on their colleagues who are keeping them in the system. it is very much like a gang mentality where the concert difficult to get out, especially with ethnic affiliation. number four, we need to apply sanctions against individual institutions, identified in the report. i commend u.s. government and the congress for the recent initiative sanctions for m23. but it will not serve the intended purpose if we sanction -- we sanction anybody else and will not sanction rwanda or uganda. then the game will continue. if he becomes a burden he will be replaced. when he became a burden he was arrested. so tomorrow it will be somebody else. and i think we cannot act like we're doing something when, in
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fact, we're just again doing the same thing, like security sector reform. and then number five, we need to push for the completion of the electoral process, and the political system. we've talked about rwanda and uganda but the bigger elephant is -- eastern congo often is discussed as if it was a country. eastern congo is not a country. it is part of a larger country called congo. the crisis that is taking place in eastern congo have their roots also. for the last five years, 2006, 2011, the congolese have been involved with the electoral process. we have not -- international committee, has not stood up with accomplished to fight it. so we need to open a process so that the post electoral system should move forward. we need to support the holding of the municipal and provincial
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elections to at this point both the national senate and the election commission are serving without any mandate. so until that happens we have a system with no legitimacy. they last, we need to think about restructuring the commission. they were part of the problem. we looked the other way when the system was botched. we cannot move on without this. this is why president mr. prendergast cannot really speak with the backing of his people. when people rise against m23 they also rise against them. that will continue. then finally, i would like to say that this conflict has gone on too long. gone on too long. it's challenges now our moral and principal. he cannot talk about democracy. we cannot be outraged about sexual violence winfax we're not taking taking the steps to stop this. in congo armed groups and international -- their
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international local backers our enemies. [inaudible] it's also the congolese army which itself is a big tapestry of different militias. so if you want to talk about insecurity, i defined in security as a feeling you have in your gut when you see some in uniform. thank you very much. >> thank you so very much. your testimony, all three of their testimonies were extraordinarily decisive. certainly time and described a way forward for the administration as well as for congress. so for that, our subcommittee is deeply grateful for your presence here today. and for sharing with us, not only understanding of the situation on the ground, but what ought to be done perhaps to truly rectified. i think the emphasis on good causes couldn't be more timely as well. i think, mr. hege, i'll never
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forget years ago in the early days of the war in yugoslavia, i a long with congressman frank wolf, went to other places in croatia after it had been devastated. then we went to belgrade and met with slobodan milosevic, and others within that government of his. and i'll never forget getting a map of the greater serbia that include bosnia and croatia, and the lack of understanding on all of our part about what the in game was was appalling. we thought this was something we would debate over short period of time, and i think, mr. hege, your point about the key goal of establishing autonomous state is largely underappreciated and perhaps our other to distinguish witnesses might want to speak about that, but you point out that rwanda's vision is born out of the geopolitical regional strategy adopted by mr. prendergast's leadership.
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it would cement and guarantee rwanda's already extensive influence over military for medical economic and other aspects of life. and i think that is underappreciated, almost in the extreme. as to why, we know the mineral wealth is a great invitation to looters and thieves, you come to do what they do. but this idea that this is part of a government overall strategy, perhaps you might want to elaborate on that, as was our other very distinguished witnesses. >> thank you, mr. chairman. on the question of the rwanda strategy for creating, or spawning an autonomous state in eastern congo, a few things that i'd like to mention as well in terms of timing. my colleagues have mentioned that the cyclical nature and the numbers of wars that have taken place in eastern congo.
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it appears that the rwandan backers of m23, the real masterminds that orchestrate the creation of the rebellion, or looking towards the post electoral period, precisely for the reasons that mvemba dizolele describe. the presidential election as a period where they would be able to mobilize in eastern, front against a delegitimize, and president kabila himself. this would certainly a part of the titrations about why, to push for this now. ..
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she would have been arrested himself. the third element that i think as they took into account in preparing the strategy because it was quite well prepared, we have extensive evidence that shows he back all the way in 2011 was and as a large amounts of weapons at his home and in numerous preparation for the return to the war precisely after the election. but they also understood that there was a generalized congo fatigue as has been often described the there is a
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sentiment that congo is always a mess. the president and been told by rwandan diplomats say that the congo has been a mess before he was born and will be infinitely or indefinitely. certainly within the u.n. there are a member states were questioning the strategy on the congo. how long can they continue to foot the bill for the peacekeeping mission which is so costly, and should we start to think of more radical solutions, definitive long-term solutions for the eastern congo and whether the current government structure is viable. i think that that was the right period to push for this and that unfortunately there is success on the battlefield recently would likely emboldened them to continue to drive for the endgame and other smokescreen issues on the table in political
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talks would only prolong the spot in the key issue i want to add to what steve sat of course. i will do my three points, security and interests, economic interest and political interest that the governments of rwanda have an eastern congo and why the continues to the interaction by the neighboring governments in eastern congo, security first. rwanda concerned over the last 18 years since 1994 about the possible strengthening. they want to ensure without any doubt that when fdlr can't come back and threatened rwanda and
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can allow the strong states that might provide support. for the ugondans they might say ucf. we've talked back-and-forth carson and the committee on that. as a second role, the economic issues that i think are deeper than the security wins, rwanda has benefited massively from the next decade from eastern congo that is why this whole campaign in the united states has unfolded among the young people, college campuses and the middle campaign because everyone is somehow complice it in this by cell phones and laptops and other electronic instruments are helping to underwrite this smuggling network and these competing mafia that are ruining and continue the people in eastern congo. there were the three minerals and others decades ago and going
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all the way back to king leopold that goes across borders that benefits us with no protections for the congo people. it's a huge windfall for rwanda, foreign-exchange, balance of payments drives their economic miracle post genocide economic miracle. in ugonda and its gold, it smuggles gold, huge amounts of gold travel across the border illegally from congo and then exported out of the country. and these are again windfalls that are hard to replace by domestic and economic development. then the third arena of the issue is political. both ugonda and rwanda is the bottom line and want proxy's and positioned in eastern congo whether they are military or civilian authorities to ensure their economic and security interests. so when the president tried after the elections to redeploy
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the elements and as ambassador carson was describing all the facts of what happened and what was underneath the fact i think is that they had established for years with rwanda and ugonda support is the ability to export illegally and extract natural resources and ensure that political and security interests of the states of rwanda. so when he tried to redeploy its forces out of that region which would have undermined that control, that proxy control the neighboring countries have over the politics and the economics of the east, it immediately occurred because they couldn't allow that to happen so of course they come to the formation of the am 23 and change the acronyms of the same group and the various points are important about the lack of any kind of domestic constituency
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that they have but never though less the result is me to become more destabilization and then allowing those that have powerful proxy's inside of eastern congo to profit from that destabilization. >> thank you, mr. chairman. one is on the peacekeeping mission. i think that it is not a part of the problem. it becomes an enabler to the security just like rwanda in the sense that a part of the challenge when you look at congo which a lot of people discover the genocide in rwanda it existed before that. those of us that were born there and grew up their country that worked. so when we go to congo today we do not to read that doesn't mean the people are not capable. some of your old enough to remember the first mission in congo.
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it was much bolder, robust, but also very determined to carry out its mandate. it lasted only four years. the war in 1960 was much bigger than what we think today. you had che guevara and the french mercenary, the belgian, but because we are committed to helping their work to protect their country together and they fought and protected civilians and allowed them to the colonel to build an army that eventually became the country, the army that the u.s. rely on when somehow congo was the strategic ally. i'm not sure what happened. but collis is simply to mean that we need to scale down the mandate very quickly and make it
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very clear how much longer they are going to stay in congo and what the evolution should be so that the government doesn't run on the u.n. for excuses. so let me illustrate if 200 women are raped the headline in the times would say the blame what fall on the u.n. first. they would say it is a continued. nobody would ask where was the army and there was a force that supposed to help it is so much shorter. of the u.n. has failed on the event of the price wasn't there to report it. when one would fail there had
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been massacres that didn't do anything. they said we will protect he will not fall. they would endanger civilians and use and in the 23 and they raided the campus but was nowhere to be seen. so over the decade is not the solution for the drc. thank you very much. >> ms. bass? >> i am unfortunately going to have to leave at this point, but i want to thank you all for your testimony and the time you took to come and i look forward to continue to work with you and fall upon what we can specifically do here on congo, and most interested in the notion of sanctions and also sanctions on individuals and how that might work, and how we might get that started from here. thank you very much, and thank you, mr. chairman.
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>> thank you, chairman. welcome, gentlemen. thank you for being here. >> most of us know at least one measure that must be taken against rwanda and ugonda and that is the enactment of this. serious stinging sanctions. however, and let's call this the way it is. the obama administration refuses to engage in serious sanctions against these countries, and this is not a typical and other foreign affairs matters that played the world today with this administration. so, my simple question is what do you propose that we do or you can do to persuade this administration to enforce the sanctions the way that it has been so elegantly stated here
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today from this panel. we can start and each one of you, can you respond, please? >> i can speak from the group of experts. we submit annually a list of recommended individuals and entities for consideration before the u.n. committee. obviously the united states government plays an important role in taking forward and studying those names to be yet many of those names while less remains confidential many of the names are included in our public reports. so there's not a great deal of surprise in that list. however, the group itself steps away from the consideration and discussions of the west that he
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provides. so, in essence we remain sort of indifferent to the steps that were taken subsequently. however, i can say having stepped away from my group of experts that measures to identify the individuals and sanctions is supporting the m 23 and in our conclusion they are not externally supporting, they are actually commanding and running the rebellion in its day-to-day activities which goes beyond externals support in many cases. that measure is to identify them, the that sanction a kick, that diplomatic pressure is important and identifying the problem. as i said, rwanda continues to identify itself as a solution. however, sanctions or efforts to
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identify the individuals running their rebellion and the government would go a long way to ensure the problem is clearly understood out of the orchestration as the command of rebellion, and that would have enormously important consequences for any peace negotiations in terms of framing the issue and not necessarily getting lost in some of the smokescreen issues that have been post facto used as a pretext to justify the rebellion. so, i would encourage any of those measures and any symbolic efforts that can be made in squarely identified as a rwandan driven rally in. >> mr. prendergast. >> thank you. there's been an amazing amount of continuity i think in the
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u.s. policy giving back to the clintons had been attrition, bush administration, obama administration. a very slow to utilize pressure. >> agreed. >> and it's been an incentive based policy. there's a long-term problem. a believe fundamentally we heard from ambassador carson today to really believe in quiet diplomacy and direct engagement and i would call it in the conflict resolution theory and inside partial model that has been pursued, and the response to that i will give my recommendations as to what the congress can do to help the situation and what we can do as a civil society group on the congressional side i think publicizing the failure of this 15 year policy and what has been so effective about the congress work has been bipartisan. the failure is larger than by partisans of the bipartisan effort in congress saying it's not working, we have to do
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something differently is crucial. that can be done through the media and through i think the contact with direct contact with administration officials. the letter that is circulating, there are numerous initiatives both in the house right now attempting to pass a quick resolution before the end of the term. there are various things that can be done to this very clearly on the public record. this 15 year failure of the constructive engagement which is where we are going now as we bring that kind of terminology that was used in other contexts and talk about this. we need to utilize this for our part to the community site of the quarter slid smith and the opening is in a symbol of how the groups that work on all kind of different issues internationally are coming together and saying let's unify our voices around a certain set
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of points and an agenda that can press the administration to become more bold in its approach, and we will undertake the project and many other groups a series of campaigns cleanout particularly the young people to face based groups and others that care about what is happening in the congo come and that i think constituency of conscience is actually expanding fairly rapidly just as we saw in 2003, 2004 in darfur and we're starting to see that in congo. the more americans care about what is happening to the people they say you know what the status quo is simply unacceptable and the policy will have a shot at altering the status quo. >> thank you. >> thank you, congressman. we have an important question. i take all of us today who spoke to you including the investor carson mengin all of the ingredients that need to be put in place. i think on one side you have a
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government that refuses to call a steady state so talk about external threats. externals support. if it is extended we know where it is coming from. we should be able to leave it. but the thing that we've talked about so personally one recommendation in order to put the u.s. congress has always been at the forefront with certain watershed events in congo and africa so it is led by the anti-apartheid bill. it's the south that supported the emergence of the democracy movement across africa in the 80's. so i think one recommendation i will say because africa is always a very bipartisan area, maybe you should consider passing a robust, more robust version of the obama law that you can push them to be applied because i'm not sure if the white house, the state
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department has signed away from that and decides to hide behind the economic rwandan recovery. this is what happened with king leopold. he was a great philanthropist, she was bringing civilization to congo. he was saving them from the slave trade. look at this great outpost. but then behind the shadow of that civilized mission, they were chopping people's limbs, killing people, tens of millions of them. so, something is happening today on the books we have people speaking with good people like yourself but nothing is happening. so i think that you have communities like the millions of young people to push causes then i think we need your support so that the other side can start listening.
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thank you very much. >> you do agree with me come each of you, that the previous administrations, and this administration know what the facts are and know what's going on. it's very blatant, but they chose and they choose not to what should be done about this. mr. prendergast, i think that you are absolutely right and getting more people involved, particularly young people. i a freshman next year coming back as a sophomore. my daughter and i had the opportunity to visit the continent of africa. we went to liberia and ghana. my daughter is great to be a physician. but she said data, we have to take care of these people. we have to help them. and if we do not do it, who is going to?
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so, it's like digging my head against the wall sometimes. i've sent numerous letters that have been sent to the administration and the secretaries. we don't get a response from it, so we do have to take this with more passion through the public to get the government to respond to it and you can be assured that my daughter and i will be there. thank you. i yield back let me ask one final question and then i will leave any final comments to the very distinguished but this is. there's been reports at least one you answer to the council member wanted to delay the report this summer can you definitively tell us is that true or not? >> thank you, mr. treen. we submitted an interim report during the month of may which did not include information
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regarding arms embargo violations committed by the government of rwanda precisely because those violations had just really manifested themselves more overtly. however, we briefed the cabinet to the committee of the information we had gathered in june, and suggested that we provide an initial amex to the report and that interim report outlining the violations of the arms embargo by the government ought we have already gone to meet with them during which they refused to support any substantial of meeting. we remained in our hotel room for those three days. the committee asked us to provide particularly the
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minister of foreign affairs and at the time was coming to new york at the end of june i personally met with her in new york and i presented to her our work in the methodology and approach in the the reason why this information hadn't been included in the interim report and outlined in detail our findings and at that stage she declined to provide any response explanation or justification of our findings. as such we proceeded to the document and was said it was made public as an addendum and not to our interim report. yes, as a committee, the consensus of the committee is that the rwandan government to
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have the additional reply should be granted by the group and have a good faith of working for and under the guidance of the sanctions committee. we provided them with that opportunity to provide any reply, and proceeded to make public statements that nevertheless they had been provided which for us is quite frustrating given that we purposefully to lead the mission of that information in order to engage in this dialogue with the government of rwanda. so, as i said, we proceeded to submit that come in and of the report then was published at the end of june. >> thank you. any final comments from any of our distinguished witnesses? >> if of mr. chairman, thank you. i said congo is too big to fail.
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we have smart people, couple weeks ago "the new york times" ran the piece saying it should be split in half or in various portion. anybody that entertains that idea is smoking something because if rwanda as small as it is has trouble, we can no longer be the ideal country as the leader, everybody speaks the same language, the same name. they've been coming over and over. if they think or anybody thinks that rwanda can control the rules, then we haven't seen the half of it. it's not the same make up, they tried to march over and they were kicked out by the civilians in 98 which led them to the ladies come as a this is an idea that we should resist by all means. so anybody that will have that on his hands it doesn't know the
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half of it. and number two, i think we need to stand for something. and the people of congo have already rallied around the space principles. and they're waiting for the support because they believe in changing things they need to push the process along. they are very capable people come a very resourceful and on your behalf i like to think you for your continued interest. thank you. >> my last point, congressman, would be that we have today i think a clash of two visions of the policy. one vision is the belief that i think we need to encourage the neighboring countries to be part of a solution and thus sanctions and those cravings punitive measures would undermine our influence. that would be a juncture with
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the administration and past administrations have pursued congo in the continuous intervention cycles in the region this has articulated in the committee. these kind of punitive measures which by the way involves hard-earned u.s. taxpayer dollars and the kind of support that is fungible the budget to humanitarian assistance that goes to the people of rwanda rather than the budget support that goes to the country's. if we utilize the punitive measures will provide leverage for the solution and if successful think in convincing.
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i believe we will work assiduously then we need to have somewhere for rwanda, ugonda and other elements that don't want a solution to have a place for them to go and i believe that place is a legitimate, credible, internationally supported peace process that allows the eastern people to be part of the solution at the table and the root causes finally to be addressed. it's not willing to happen unless we get u.s. leadership and that's why we need a presidential envoy. it concludes that essentially the sticks don't work. they are very ambitious, very determined that wouldn't deter
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their behavior. there is a great deal of evidence since the report expect the creation of the m 23 the rebellion has only grown, and their involvement has only become more overt, and i'd say many of their commanders have become emboldened to be obviously the taking of a very important provincial capital is a perfect example of that. however, that doesn't mean that as i said earlier we shouldn't continue to stream the problem as a determined effort to attain this objective which is as i said and autonomous eastern congo duraid is a believe that if any of the short-term consequences of their current project may be outweighed by the dean of that state.
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particularly as i said, given the wealth of the atomic interest rwanda has an eastern congo and the cultural ties and the security interest they would be able to ensure including other political dissidents. however, that said, what it needed at this point in order to be faced with that rwandan determination, the peace process would have to find a way to identify a solution that appears to appeal to their long-term objective in order for them to stop. i'm not convinced of anything less at this stage something close to that long term objective would call them to stop. however, if that solution is identified, it could be some sort of a decentralization
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process as is already stipulated by the constitution. however, that -- the implementation of that agreement will require significant accompaniment, tremendous long-term investment not only from the united states but other members of the international community to reinforce the capacity of the states and precisely insulate it from the external control and manipulation. and that will be as i see it practically and realistically one of the keys to moving forward from this current crisis, but it requires that a very long term commitment to building up and economically and politically independent congo state and in eastern congo where its neighbors will eventually look at it as an equal and not a country that it can continue to manipulate and benefit from.
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>> thank you for your extraordinary insight again and testimony. and i do want to thank c-span for their editorial and the independent judgment scene of their way clear to cover this hearing because people in america know far too little else to what is going on in the congo. as you pointed out earlier the enormous loss of life, 6 million plus people that have died in an and the fact that as we speak, people's lives are being taken away from them by this terrible rebellious and 23. thank you so much, and this hearing is adjourned.
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[inaudible conversations] [inaudible conversations]
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>> he is on that bus. i've been on that bus. >> as all of us i think in this country were starting to see people coming out and talking about their experience of this phenomena that so many of us have experienced in one way or another ian had no words for other than adolescence, other than growing up, we finally see six people were starting to stand back and say this isn't a normal part of growing up, this isn't a normal right of passage. there was a moment there was a possibility for change, and the director and died decided to start the film out of the
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feeling that voices were kind of bubbling up to the surface to say this isn't something that we can accept any more as a normal part of our culture. and as president obama begins his second term in office, was the most important issue for 2013? >> tell us if you are grade six through 12 making a short video about your message to the president. >> c-span's studentcam video documentary competition to win a grand prize of $5,000. 50,000 in total prize is. the deadline is january 8th. for more information, go to members of the tea party held a conference on wednesday
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standing by their decision to refuse any proposed tax increases after briefing the founder have a petition with over 150,000 signatures in support of not increasing taxes as a part of the deal to avoid the fiscal cliff. several members of congress also participated including representatives paul brown and john fleming and senator rand paul. this is just under half an hour. >> thank you for joining us. i am with the tea party news network. the key element today is not just that we haven't been enough already. the truth is our government has spent enough already. i would like to introduce you to the men and women on capitol hill that are fighting to keep our taxes and to keep us from going over the fiscal cliff. today joining us we have senator rand paul, we have representative fleming, representative louis gohmert
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command representative broun. starting off with us today, senator rand paul is one of the first tea party endorsed candidates and knows how to give the other side a taste of their own medicine. from kentucky i would like to introduce senator rand paul. >> thank you. the republican party is the party of limited government and low taxation. i don't think it's time to change who we are and what we stand for. some have said this idea of pledging not to raise taxes is a bad idea. i agree. i ran on that platform and i was elected because the voters of kentucky want less spending, limited government and less taxation. i know of no other way to stimulate the economy than to leave more money in the private sector. if you want to stimulate the economy in kentucky you leave more money in louisville kentucky. unless they cut out waste, abuse
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and fraud and nightmare of spending why would we even consider as republicans think about raising taxes? i tell them come to me after you've gotten rid of all of the spending. come to me when you've gotten rid of the $3 million you spent last year to watch monkeys of methamphetamine. come to me when you get rid of the $300,000 you spent last year developing a robotic squirrel to see if a rattlesnake will strike a squirrel that is and wagging its tail. apparently they couldn't get any real schools not to volunteer. they spend half a million dollars on developing a menu for mars. if you don't have a job and you are looking for a job this is a good one. you get to go to hawaii, you have to like food and you sit around and think of things you'd like to eat if you were on mars. there's also a 5,000-dollar fee you get paid as well. after all that, they think pizza would be good on mars. we have so many problems to rid entitlement spending, everything is out of control and they want
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to raise taxes. we have 160,000 petitions saying don't go back on your tax pledge. i agree wholeheartedly i plan on keeping my vote to kentucky and i will not vote to raise taxes. thank you. >> representative paul broun? >> i'm paul broun from georgia. i believe firmly we shouldn't raise taxes on anybody for any reason. the government has too much money. it's doing too much in a way of taking away our liberty. i believe in the constitutional limits to government as our founding of this. we have to stop the spending. we have to send power back to the states or the people is the tenth amendment says it should be. we can't balance the budget. we can stop this fiscal insanity that's going on here in washington without raising any more revenue. we need to raise tax payers, not
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taxes on any one. and i will not back down from this. it's absolutely critical in my opinion that we reduce taxes, reduce spending, and get our country going in a way that it should be. i want to get rid of wholesale federal government. senator paul, leggitt friend akaka of some of the idiocy expenditures of the federal government. i want to get rid of the department of education, the department of commerce, the department of labor and let's get rid of the epa while we are doing it and really cut spending. let's go back to the constitutional limited government as our founding fathers meant and not raise taxes on any one. representative? >> thank you. islamic people want to say you are just trying to help your rich friends.
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that isn't what we are about. we are about trying to protect the principles for which this country was founded. we don't want to protect the rich. we want to get back to a system where anybody in america can get rich by hard work, saving money, entrepreneurism, and get what this president, what the senate wants to do, the majority, hopefully we will have a new one in two years, but the majority right now, they want to punish people that are working hard and trying to make it. you can go back and see rand paul propose a flat tax and i proposed a flat tax. we can negotiate about numbers but let's get to a system that is fair and with all of the rhetoric about how warren buffett's secretary should not have to pay a higher rate, this president has not proposed one
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system, not one mechanism, not one bill that would equalize the rate of people pay their fair share clacks yet when you ask what is the fair share? i'm not sure. how about a flat tax if everybody pays the same rate? this is a time not to publish, but it is a time to get america back and i want to finish with flexible. i was in new york to weeks ago, about two weeks ago. i was in a cab, and we got to talking with the gentleman and it turned out that he was from west africa, and i've been there. we visited. she has his master's in computer science to be yet he came here 15, 20 years ago he is driving a cab and he says if we would put we stand money, then our economy can get going and he could get back to one of the good jobs she has in the i.t. business.
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the cab driver gets it. he gets it that we are not lead to help ourselves by raising an extra $160 billion over one year when we have been spending 1.6 trillion. the key is to get spending under control. it's to have a fair tax system, not one that rewards warren buffett, but a fair one, and we can do that. but we are not going to do it with this administration and the senate's majority to divide us all once one against each other. thank you. >> representative fleming from the fourth district of louisiana. >> thank you. i want to share with you today a little bit of trivia that's not trivial, and that is that our federal tax system began as a result of the 16th amendment that was ratified in 1913. do you realize that in this
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entire time coming and even before that, going back to the founding of the station not once has a republican controlled house of representatives ever lifted the tax rate on the american citizens? so, that means if we do it here this would be unprecedented raising the federal tax rates on our citizens for the first time in a republican-led house of representatives. i have laid the sold in the "the washington times" op-ed and will come out this evening on line and to marland print there's more details i would like to share of that through the times article. and those who've spoken already have it exactly right. even the democrats when you get down to it they really agree with us on this issue. why? well, the president said two years ago in the difficult financial times. well, ladies and gentlemen, the times are worse now than they
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were then supply in the world with the change that? and the agreed upon 98% of americans a tax rate should stay the same. so i would contend that the glass is half full we need to get the democrats to back off on that other 2%. they are the 2%, the small-business owners that have the pass through, the s corporations it's mixed with the capitol as they reinvest with their business is so critical for job growth if you want to raise revenue the way you do it is not to raise taxes on the people already paying the lion's share. that is how you will accomplish them. also want to address one other thing. the president also asked us in congress to hand over the power of lifting the debt ceiling which is mandated in the
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constitution of congress today to have a resolution out. we have 35 members that have signed on so far cosponsoring it. they said no, we will hold these constitutional privileges and powers to ourselves and never give them not so i think that is the central. so i will end by saying that i agree with the tea party. we have been taxed enough already. the real debate should be on the spending. that is what is giving us problems and even while we have debated this, our revenue has gone up 10% and our spending has gone up 16%. thank you. >> it's been a pleasure to be with you today. still mark twain rumored to be long distant cousin. he said to the right thing to gratify some people and astonish the rest. i think mark twain should figure that out and add-on it makes a
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few people pretty angry. about ten days ago i did something in kansas that we do normally come in and that is to keep our word and put the video and reaffirm my pledge that seems to controversial seems other members of the house our representatives. but i tell you i meant it. there's a pledge to 700,000 that are firmly believed washington is taking too much of your money. and so let's take our pledge. at the end of my pew in church the other day was the man whose name is tony. and here is what is going to have been an american packaging
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in kansas he isn't going to hire two more people next year. the tax increases don't create jobs. the president would love republicans, it's not about the tax revenue and he wants republicans to violate the principles to admit the failed economic policies are the result of the they can't go down that road, we can't put on the road of violating our principles, we can't go down the road of not keeping our word on the pledge. for so doing i believe the u.s. house of representatives will be controlled by the other party in two years if we do that. thank you for the leadership. we are americans getting engaged in the saying we want washington to listen to us. thank you. >> not even before the polls were closed in november people were already saying that he party is dead. well i stand before you with not only wonderful representatives and senators that identify themselves as tea party members but i stand before you with 160,000 individual signed petitions that we have collected
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over the past two to three weeks that we will be delivering over to congress. in that petition, it says i ask that you take a stand against the dangerous games president obama is playing. he continuously states have the tax kutz must go. these are the current tax rates that have been in effect for over 12 years. we must not let him get away with this spin. what happens in the next few weeks could very well determine if the republican party survives as a coherent political movement were not. i will open up for questions from the media for elected officials. a spirit of the senator votes to increase taxes, will you primary him in 2014? >> this isn't about race in 2014 it's about the petitions that are assigned year. so, not looking forward to any
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particular race what makes sense financially we have to stop standing here in washington. there is no question about it. and i am going to continue to stand firm on my pledge to the people of my district, the tenth congressional district in georgia that i will not vose to raise taxes on anyone and i going to work very hard to stop spending this one here. the outrageous spending in the federal government. we would love to have them there and we meet with our team while
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we were in town. >> key and i are pretty close. >> if he leads the charge on raising taxes will there be a rebellion among of the certain conservative members? >> my suggestion to them has been that i've talked to several members and you can ask them, too we put forward what we are for. you know, i feel we should put forward a plan that needs to extend the tax rates that we've had for 12 years. that we what reform entitlements and put them on the table and there are already bills that reform social security and medicare and cut sycophant spending. that's what we are for. we cannot as a party raising taxes just a little bit less. the other point that i would make about this is - if it gets beyond that and something is going to happen, i think we should encourage those in the house to vote, what the democrats' own the tax increase
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and become a democratic plan. and one final point that i would make is that i think the president is dead wrong. if you lower rates you sometimes get more revenue. if you raise the rates you sometimes get less revenue. and in the 20's, the 60's, the 80's and even the bush tax cuts coming you've got more revenue. but guess what the rich pay a higher percentage of the revenue when you lower the rate, so i think it will work and it's going to hurt the economy and the economic growth. the democrats could be the party of the taxes and we want to be the party of low taxes. but we don't need leadership to model that message and make us the party of not as high of taxes. estimate this is a question for the members. do you have any scenario where in january you were not voting for john boehner to be the speaker and perhaps supporting another republican? >> you know, you have to take
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them as they come. we will see where we are in january. i mean, there's all kinds of scenarios but this is a time for leadership. yes it's true already in the house we have passed an extension of the current rate back in july and there is more that can be done now to bring home the point that we want to help the economy. we do hear from democrats and even some of the independent state i would be okay with a little bit of tax increase if that would help. but they don't get is there has never been a time in american history, not modern history, where taxes have been increased that the spending didn't increase. and that is the problem. he throws out we are going to increase spending more than we are going to make cuts.
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that isn't being realistic. and i tell you if this president were to go into a bank and say i need a loan for the future what's the purpose? i can't stop spending and i'm going to keep spending more than i bring in for the foreseeable future but we are going to spend so much that our children, and maybe someday their children, i am going to pledge someday they will pay it back you have the child protection services out taking the kids away because that is so immoral and your response will come in yet that is what we are doing as a government. so, i hope it is a time for leadership on both sides to step up and say we are going to do the moral thing and that is not keep spending future generations money. it is immoral and it needs to stop and we will see how the leadership deals with it. >> i was surprised. i nominated new gingrich and i read on my blackberry that in that closed confidential class
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hearing somehow within ten minutes a was all out in the press. >> to nominate another name outside of john boehner? >> this is december. let's see how the rest of the year plays out. >> do you feel like your colleagues are cracking at this point? >> i sure don't feel like my colleagues are cracking. i was in a conference this morning where the republicans are on a normal weekly conference committee and i don't think people are cracking anymore than you have already heard. they say we may be open to that, but let's get realistic. the problem is spending and even those that say we might entertain a, we need to see a tremendous amount of less spending, and those of us here plus many others you are not going to get there by raising taxes a little that and continue to spend a lot. so, let's get the spending under control and let's make this the
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one time in history where we actually brought down spending and then we need the tax is more fair. estimate does anyone feel we are going to go over the cliff, and is that really the worst -- >> i tell you we went over the cliff it was called tarp -- t.a.r.p. and then was called the debt ceiling so we are bouncing from ledge to allege and so there is a chance we will fall off of this led gm to keep falling until people do what rand paul is suggesting, stand firm, do the right thing and then we will get the to climb out of this whole. >> this term fiscal cliff has been claimed by the press. the media has been talking about this, but this isn't the real fiscal cliff. we headed to a total economic collapse in the nation.
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if we do not stop the spending. it doesn't matter how they get their taxes whether it is through the fair tax that i support for the flat tax or a hour current tax system. if we continue taxing people and spending more money than we bring, then we are headed to a total collapse of the country economically. that is the real fiscal cliff. it's not going to happen january 1st. it's going to happen sometime in the future. and i don't see this administration really dealing with it. and the policies of barack obama and his administration its way to really cut us off the fiscal cliff. i believe we are headed towards the depression. it's worse than the 30's shall finish fifth. spending is going to drive that. we have to stop taxing people to buy but actually like to lower the tax rates as well as lower taxes. i want to get rid of the death tax and get rid of corporate taxes, get rid of dividend taxes
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and capital gains taxes. let's have a policy that is going to really stimulate this economy and create millions of new jobs to bring that policy that i just mentioned would bring trillions of dollars in the country overnight. it's being held offshore by corporations. we create millions of new jobs. we start raising up people who had good paying jobs. they pay more taxes, as we pay down the debt. the debt is going to kill this country economically. we have to deal with it. but first we have to stop spending. >> i would like to follow-up where a lot of this is coming right now. several republicans have come out and said let's go ahead and raise taxes on high-income earners and get it off the table i haven't heard one member of
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the house or the senate actually make a case for it being a fiscally sound policy. if that actually does anything good. we all know that it adds very little revenue if any. so it does nothing on the revenue building side. so, it seems to be more of a political strategy than it does good policy. and so i contend, and i think my colleagues politics is good policy the vlore taxation it and letting the company flourished to economic activity and freedom, and eventually the american people will appreciate that. rather than targeting a small group of our american citizens who are the most important ones creating the jobs now, which is exactly what we need. >> the tea party was met today
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is almost like it was almost 200 years ago. the core issue is fiscal economic conservatism to meet to discuss that as well as a new action team on the help the president and ceo cefaratti. >> first i want to think the congressman and the center for joining us. we have to give the press conference. we are here representing the people in for the pound and stop there on both parties that have been trying to clear the tea party movement will take a look. we have two weeks and the potential is still going to be www bought again, the people are speaking to give most of the republican congressman and senators made a pledge not to grover norquist but to the american people not to raise taxes, and my wife is a teacher. i have heard more excuses changing rell how you can get
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out of the new tax pledge to was made and it doesn't matter in the year the you made it we've been in touch with the people that represent and stand behind the new tax pledge and they know who they are. they select top leaders that want to come in and we can get the whole house and senate and they know who they are and want them to know our organization alone has over two and a half million not just tea party people but simple american people feel like we have to stand up for the constitution because our elected leaders are doing it and that's why we are here. i'm just a tad from gilbert arizona and i am here because these men are patriots because they are standing behind it and the american people are going to stand behind them and that's what you see. this is just the beginning. if people think the tea party is dead, you haven't seen anything yet. they are going to be right there with us and let me say a warning to those that think the revenue
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that we don't think revenue means taxes, we do, and the american people are smart. the loopholes and tax deductions, taxes are higher next year they were last year, guess what you have taxes on me and we are going to remember that and call you out, and the american people, the people we represent are going to be calling your switchboards and have the petition system that goes right into their e-mail and you are going to be abolished by the american people because it isn't just the tea party movement. we represent ronald reagan democrats to a fiscally responsible people in all parties. this isn't just republicans, libertarians, we are about limited government, personal responsibility and free markets and i don't know about dewaal but i think that most of us across the country in all parties support those things come and again, these patriots right here are willing to stand behind us. the american people are going to stand behind them.
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thank you. >> we are launching today in action committee of logging that would be up on the hill headed by bob adams owls less nigel as well as others the will be joining to the petitions like this known and give notice to the policy was well as to make sure the tea party voices heard up on the hill. thank you for joining us today. if you have any questions please feel free to ask their representatives as well as every elected officials. thank you very much.
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the white house was very controversial as most were. he designed the washington city
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car there was competition and he submitted design for a palace but americans were not having a palace. a wasn't particularly awe inspiring. in fact in 1821 a european diplomat said he was neither large nor awe-inspiring. the answer, the congressman dave, said the building served its purpose. if it were larger or more elegant perhaps some president would be inclined to become a permanent residence. >> former "new york times" critic has gathered a few of her favorite white house photos in the white house, the president's home and photographs in history to 40 erik. houses of congress wrapped up work for the zero weeks yesterday.
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about the progress his agency is making in implementing the derivatives provisions laid out in the dodd-frank financial regulations law. she appeared along with securities and exchange commission's robert cook before the house financial services subcommittee on capital markets. their testimony runs about two hours and 20 minutes.
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>> good morning. today's committee is called to order. thank everyone for being with us at today's hearing. it's entitled challenges facing the u.s. capital markets to effectively implement title vii of the dodd-frank act. and i welcome the panel and i welcome colleagues on both sides of the aisle. before i begin, i will start with us a little more than a housekeeping matter. i made a similar statement previously to a panel when it was private sector before us and it is apparently that i make this statement here. and that is that it was agreed
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in a bipartisan manner with of the rules of the committee with regard to testimony and its preparation for the committee and for both sides of the aisle members of the committee. mr. gensler and mr. cook as you are aware the committee receive written statements 48 hours, two days in advance of the hearing. in this case, this committee invited dewaal to testify. that was back before thanksgiving. ..
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>> this was postponed one time. so i hesitate to put a rationale as to why the commission are unable to provide the statements in a timely manner, and wonder why they're not able to comply with the house rules when i'm sure tha you require there is businesses and what have you to comply with your rules. some would suggest it appears to reflect a lack of respect for the committees and its members. and just before we begin i will ask both of you, is that the reason? >> would the gentleman yield?
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>> yes. >> with all due respect for your concern about whether or not our witnesses are in compliance with the rules, i would respectfully ask the chair to have a private conversation with them about their work loads and what they are attempting to do. not making excuses, but i think we would be better served if we could move forward, and for today, i think you have indicated your concern. let us do a private meeting, or private response to that and move on. because the issue before us today is of such particular importance i would not like is to utilize all of our time with them having to make an excuse. so i know that the ranking
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member -- as ranking member, you are concerned about these issues. i would respectfully ask that we move forward and have mr. gensler and mr. cook both talk to you a little later about this. >> that's fine, and i will be further into the ranking members wishes on this because i'm sure she shares that came -- the same concerns i do. staff has the same time to review this. so with that we will move into the hearing, begin with opening statements. i will recognize myself for five minutes. as everyone is well aware, the main reason congress is still in session at the recent election is because negotiations are ongoing to try to reach an agreement on the so-called this conflict. however, there is another clip that is receiving a lot less attention at has potential to be as problematic and costly to main street costly to main street, businesses, retirees, farmers, many suppose, and that,
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of course, is the dodd-frank regulatory cliff. while the president campaigned for reelection, his financial regulars kept a number of these potentially economically damaging rules, you might say bottled up, to get through the november 7. now that the election has passed, regulators are free to unleash their regulation tsunami on the u.s. economy. whether it's the qualified mortgage, volcker rule, the risk retention, the collins a member, the economic impact each one of these will persevere. today through will focus on just one specific area that is regulatory cliff, new regulation of your swap markets under title vii. so let me begin by correcting a comment, mischaracterization from friends across the aisle sometimes. republicans do not oppose already wishing. in the aftermath of the sub financial crisis republicans opposed additional regulations. believe it or not we do support regulation of the market. unfortunately, some or all --
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colleagues present -- or usable directly swaps market altogether. this cannot be further from the trees. my colleagues and i support commonsense, thought the revelation of the markets about transparency and allow for main street and users to be up to effectively hedge the day-to-day operations. in a prudential manner. unfortunately, terms of proposals this has not been the case. recently the ctc had a global market advisory committee meeting with the foreign counterpart. during that meeting ahead of the the european commission financial market infrastructure, patrick pearson, described in detail many of the potential negative consequences of some of the proposed rules in title vii. and he stated, stated at the time, washington, we have a problem. and i believe you if you sitting at there he might say chairman gensler -- chairman gensler, we have a problem. so the criticism of the ctc has
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received from foreign countries has been overwhelming. europe and asia and australia and other countries have formally weighed in as well. if this keeps up, some suggest our president may have to go at the beginning of the uncle around the world doing one of his famous apology to words for what is going on here in the country. the criticism of received is by no means limited to foreign regulators. there's also been a lot of criticism levied by many domestic entities including some of your counterparts at the ftc. and even some of your own commissioners. even former clinton administration chairman of the council of economic advisers, senior fellow met at the liberal leaning somewhat liberal leaning brookings institution, martin baily has suggested a swing of the pendulum has gone back and is overly harsh. i also constantly about the ctc being a world-class regular. that's what we all one. i am told is the best entity to determine the rules of the road
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for the swaps market, which some might have doubts. for example, does a world-class regular rush forward on rules, and then after that issued dozens of so-called short-term no action letters to exempt market participants? and what a world-class regular to circumvent a lawful good government building in progress, process of congress by issuing regulations through guidance or staff e-mails? does a world-class regulator aigner specific letters from congressional oversight panels? or does a world-class regulator front run its foreign and domestic counterparts in order to try to have some sort of legacy for the institution in this country? does a world-class regular not properly prepare its rule makings only find them struck him repeatedly in the courts? and what a world-class regular through an entire consumer funding market into disarray, doing so by encroaching on another regulatory discretion?
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does a world-class regulator repeatedly defied congressional intent by not following congressional statute? does a world-class regular great arbitrage opportunities and reduce competition for market participants but overreaching on this proposed rulemaking. so from the refusal to work collaboratively with foreign and also domestic counterparts, to the attempts to bypass the appropriate cost-benefit analysis that we require, laws and unnoticed and extensive actions create more market stability, to also refusal to follow explicit congressional intent to about voice brokerage to force markets, the swap markets to go over now to future market because, well, it's a chaotic and over reaching nature of the rulemaking, i can say that the entire implementation then of title vii has been somewhat, you might say, of a train wreck. and now because of a train wreck we have asset classes migrating away from the swaps into the
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futures markets, and i'm not sure why then the ranking member went through all the hard work, he's not here with us today, that bears his name, that the regulations being finalized, for the ranking member of the full committee, if the laws being finalized by the ctc simply make swaps that economically unfeasible. so what do we need? we need an appropriate and workable regular regime over our swaps market, if there's to be one. the framework should promote transparency, increase efficiency and allow end-users to effectively hedge the risk. this committee and others will have to hold many other oversight hearings going forward to ensure that this is the eventual outcome and implementation, therefore, is to import, affects too many people to let it continue to carry. we must get things back on the right track. that involves commonsense. i yield back and i yield to the lady from california.
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>> thank you very much, mr. chairman, for holding this important hearing today. and i'd like to welcome mr. gensler and mr. cook here today. mr. cook, i understand that this is your last hearing, that you will not be the director of the division of trading following the session. so we would like to thank you for your service. mr. gensler, thank you for appearing here once again. and i would like you to not feel constrained to defend yourself against the accusations that were just made about you and your work. under title vii of the dodd-frank consumer protection act, the congress responded to one key cause of the 2008 financial crisis, the unregulated over-the-counter derivatives market. through the act of congress
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attack the commodities future trading commission and the securities and exchange commission with bringing much-needed transparency to this market, which amplified the collapse of the housing bubble, and cascaded losses across the global financial district. the cftc and the sec are now in the process of implementing what the congress has passed them with both the regulation, at the entity levels, and with regulation at the transaction level, including and data reporting, margin, trade execution. once in place, these rules will bring much-needed stability to the financial system while also lowering costs to the end-users that rely on these products to run their businesses. with that said our hearing today will begin to get into the details with regard to some of the rulemaking at ctc and sec are now conducting, particularly
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with regard to how regulation will extend across u.s. borders. on this point i think it is important that we -- on regulator risk act to the united states while also recognizing some of the legitimate concerns raised by market participants, including a lack of harmonization, between cftc, challenges raised by the faster implementation timeline in the u.s. relative to the european union and asia as well as lack of global harmonization and a lack of clarity regarding implementation dates. in addition to exploring these concerns, i look forward to hearing comments from stakeholders related to a number of other issues related to title vii in its implementation. i think we can all agree on the broad goals of title vii which will strengthen our financial system, even as we continue to debate the implementation details of some of these reforms. with that, mr. chairman, i thank
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you very much, and i would yield back. >> it gentlelady yield's back. the chairman of the full committee is recognized on this. >> thank you. you know, as we all know the dodd-frank active 2300 pages long, and title vii which is the subject of this hearing is 444 pages long. reforms are absolutely necessary. we all know what happened. we witness what happened in 2008, and it should be no question that we needed reforms. actions of companies like aig and others, there were a lot of innocent parties and the economy, jobs that were lost as a result of those actions. and i think we know, and i think the dealers should report their trades to a data repository, or an appropriate regulator.
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dealers should submit eligible trades for clearing their central counterparty or register clearinghouse and electronic platforms, and exchange trading and voice brokerage should be available to market participan participants. having said all that, the rules must have some flexibility. they must be flexible enough to have the alternative forms of execution to flourish. if all derivatives were supposed to be traded on an exchange, then they would all be futures. derivatives are different from exchange listed products, and imposing the listed futures or equities market model on the derivatives is not the mandate of title vii. and i know there's some different interpretation. i want to say that the very
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complexity of this, we were all there, all of this was the last two or three days, the last night, things were thrown together. and that's a problem for the regulators. you know, this is not something you went out and wrote. it was handed to you. and i don't underestimate your challenges. and i want to compliment the sec and the cftc, and your staff, because we've had seven hearings before the subcommittee. that's required a lot of preparation on your part. you are getting with become with the challenges. you are continuing to deal with in this behavior in many cases in the market. this is the greatest rewrite of our financial laws since the 1930s, i suppose. and i want to say, mr. cook, this may be your last appearance
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before the committee. i appreciate your service. i appreciate chairman gensler compuserve during a difficult time. i don't think this committee and members onto underestimate the challenges and sacrifices that you have made. and sec and the cftc. my concern, and i think i can turn off a lot of us, and this is not blaming you. part of this is just the law and the ambiguity, it's ambiguous in parts. it's subject to different interpretation, is that there has come if we have conflict and definition on what's capital, for instance, which appears to be the case with the regulators, then, and even the global regulatory bodies, people can't seem to agree on some of the definitions, and then our
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financial institutions are having to deal with various interpretations, various different approaches by the regulator. and i would just urge you to try to sync those come because there's a real concern, i think on the hill, and this is, part of this is the law itself and the complexes of the law, so it's not, not something that you created. but it's absolutely essential that when this becomes operational, that it syncs together and its functional. and i would just urge you to consider, as this is implemented, its effect on the economy, the markets, the institutions, even your abilities to regulate. it's going to be absolutely essential that you cooperate in this effort. i want to say this.
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the financial committee has been successful in a bipartisan way. many times working with the sec and the cftc, in fixing problematic, what some of the big problems were title vii, including, we struck the provisions that would impede american business, use the derivatives to ensure stable pricing and to reduce volatility. fixing the indemnification provisions and the swap push a program. that's all been done by this congress. and with the help of the regulators, and, and moderating the extraterritorial roots of title vii. so i would hope that in this next congress we can continue to work together, not pointing fingers or publicly -- it's going to require a lot of behind the scenes work and a lot of work together.
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because we are all patriotic americans. we want what's best for the economy, and we need to just, for the sake of the financial industry and consumers and the american public, we need to try to get together and cross those bridges and try to come what i would say, make these regulations functional, ma and implementation as smooth as possible. and i appreciate your attendance but and i would like to say this is, mr. schweikert, who is vice-chairman of this committee, one of the most capable members of this committee will not be serving on it over the next two years. neither mr. dold, ms. hayworth, ms. biggert, and i think we all agree they are some of our most thoughtful members that will be with us. it'it's a tremendous loss to our committee i think, and its ability to perform a service. and so, but i think the
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gentleman for being here and i think the work, many times thought, you know, a lot of criticism, a lot of frustration on your part. no one ought to think that this is a problem that you created because it's not. thank you. >> and a gentleman yields back, and i, too -- >> and i -- one of our best buddies, i was to san antonio on two occasions with him. and i actually mentioned ms. hayworth. but we -- i want to thank you for your service spent i think the gentleman from alabama, and also echoes the words beginning with director coke for your service, and we do appreciate that. and also for the members of the committee. it is indeed a true brain trust we're losing on the committee. these members brought a significant amount of ability to the committee. i think that was one of the things we all said with this
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class coming in, and these members of the committee, that they understood the issues and they did delve into it in a mightily we. and, of course, that goes to strong measures to my vice chairman, who i will certainly miss in that capacity and in many services they perform for they perform from athletics i thank y'all for your service to the committee. and i will allow you a moment at the end, 10 seconds, with permission of the ranking memb member. >> thank you, mr. chairman. so the point of personal privilege. for all of us. we love being on this committee, but do you notice a pattern here of how many of us are going to be gone? could it be you? now. it is truly been one of my great joys being on this subcommittee -- >> [inaudible] >> thank you and with the, and we will be mindful of the time. >> mr. chairman, what i'm going
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to do is i'm going to building a little bit of extra time to make up for the difference. so with our next speaker, mr. lynch, there will be two minutes. >> mr. lynch is recognized for two minutes, thank you. >> i think the ranking member and i thank the chairman for your courtesy. as well, i'd like to thank the witnesses here for your good work, for your service and for helping the committee with its work. as we do, title vii of the dodd-frank act brought historic a much-needed reform to the over-the-counter derivatives market by bring the financial products out of the shadows and onto transparent exchanges and requiring companies to actually show that they have the cash to back up their commitments. has the full committee chairman, the gentleman from alabama mentioned earlier, in the aig example, we had a small london affiliate of the insurance parent managed to quietly make enough of these risky deaths to put the fate of the company at risk and also the fate of the entire financial system in
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jeopardy. congress has not enacted title vii to address this kind of rampant speculation and turn the over-the-counter derivatives market from the opaque a crew market operation to a more transparent public market, something more akin to the stock exchanges. the regulars have done much to put these went into effect and i want to thank you for your continued work. but more must be done before we contain the derivatives market and sound. we also want to make sure that the rules apply to the entire derivatives industry, whether that be the swaps market, the future smoker or any other market. if it has the capability to bring down the economy, as happened in the aig example, so i hope that the regulators will move forward with the necessary reform measures, and this committee will again provide you with the resources necessary to get that work done, because it's
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very important to the entire financial system. i thank the chairman for the additional time and i yield back. >> him gentlemen from california. >> next will have ms. maloney for two minutes. >> thank you, and welcome to the witnesses. title vii of dodd-frank is in many ways the heart of our financial reform. derivatives trades were uncredited. transacted completely in the dark between two counterparties with little oversight. and the financial crisis proved that a foreign financial institution became overly leveraged and invested in overvalued instruments, that one institution could bring down the whole system. aig, confidence fell like that, and they came before this committee and told us they didn't know where those swaps were. they did know their exposure. they only needed 50 billion. they kept coming back. next time, 85 billion. we still don't know what's going
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on. it ended up being $185 billion in taxpayer money. dodd-frank tried to change that. it put rules in place, capital and margin requirements, reporting including components and other checks on institutions ability to add risk to the system to put some bite so the people could understand what was going on. now, the cft, to its credit, has released roughly 60 draft rules and proposals. yet in the days leading up to the october 12 effective date, a number of the rules they were forced to issue these no action letters and guidance because they needed more time to act and to get it right. and we do need to give the regulators enough time to get it right and to really get it right because it's so critically important to an end away that we do not implement rules that drive business away from america, and that we do not
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implement rules that make it difficult for us to interact with the markets and other countries and certainly with the s. -- sec. but i feel that markets run much more on trust nan on capital. i would like to see america remain the financial capital of the world. and i'd like to see rules that help us remain in that position. i'd like to also understand what all the financial crises seem to happen in london. aig explodes in london in their financial special markets office, not in their well-regulated new york. the london well, the libor creuset apply to all the crises happened in london? thanks. my time is up spent i thank the gentleman from new york. and 42 minutes. ms. moore is recognized for two minutes. >> thank you so much, chairman
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garrett and ranking member waters. i just want to lobby the sec nctc for the extraordinary work that both agencies have done to this point. it's a herculean task when you consider a point that ranking member waters has driven into the ground, and that is that you're not adequately funded to do the work that we've asked you to do on such a short timeframe. i am concerned about a couple things today that have already been mentioned, and i look forward to hearing from the regulators, the rulemaking process, particularly on h.r. 4235, which is to build and i authored, which removes the requirement that they be indemnified prior to sharing the data with other regulars, including foreign regulars. that sec has testified to the committee that it favors removal of indian education requirements
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to the sec commissioners have opined on this, and yet the cftc interim guidance on and unification is something that is not being, it raises grave concern among our foreign regulators as to its efficacy. finally, i am troubled as we heard earlier by reports detailing the parties are encouraging the use of products with features over swaps to avoid margin, and that they're being marketed as an economic equivalent. although i think they carry unique market risk. this is a regulatory arbitrage, i believe, and i would argue that the motion of these products may provide another damaging example of market participants putting their interests against, head of their end-user customers.
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idu thank you for your testament and look forward to hearing from her witnesses to i yield back. >> the gentlelady yield back. the gentlelady from california. the gentleman from connecticut is recognized for two minutes. >> thank you, mr. chairman but i like to take a few seconds. thank you, mr. chairman and direct working with but i like to take a few seconds to try to offset some of the criticism of you in which this hearing opened. of all the vast causes in the whether the difficult is that brought down the economy in 2008, no area i think is more complex than the areas that you've been charged to oversee, derivatives. not enemy, not for me, not activities of countrywide. this is one of the more catastrophic areas as will look back on when they were, and also probably the most complex area. and i salute you and couple that you are really working hard iran summit that is a normalcy challenging in the face of criticism but i exit the chairman of the committee when i say this. it is -- a sequence of the also
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forgets the devastation that was visited on this country, the trillions of dollars of lost value as a result of the downturn, the devastation that was visited, forgets one would like to nominate are bandied about and what kind of tsunami hit and the councils in 2008 in 2000. thank you for your efforts. you're also struggling uniquely i think with cross-border issues. we've got lots of conversations on this issue, and i think that regardless of party we agree that final regulations from the public policy standpoint should avoid international arbitrage. we don't want these instruments which are so useful to so many commercial end-users, and by the way, many businesses are also very dangerous, to move to less regulated environments and, therefore, decrease our transparency of these instruments. we also want to make these regulations with a nod towards her industry competitiveness. so i close with just a request, which is in particular as a look back on the events of october 12, and some of the
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concern about offshore entities not perhaps registering, i would make a request of both of you that you give us a perspective and an update perhaps on how to delete those events inform find a rules and how you feel about them. but again, close like i begin, thank you for your efforts in this terribly important area. i yield back. >> mr. green for two minutes. >> thank you, madam ranking member. and i thank the chair as well. and i thank the witnesses for appearing. it is my belief that the general public probably does not put a lot of emphasis on words like arbitrage and cross-border swaps. but i do think the general public understands that a major institutions such as aig ought to be properly funded. and i think the general public understands that this country by and through its representatives did the right thing when we did
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not allow aig to bring down the economic system, not just in this country but probably and possibly worldwide. so i'm here today to thank you for what you're doing to help us perfect dodd-frank. there is still great work to be done, but anytime we pass legislation of this magnitude, there is work to be done in the years to come. i plan to work with you, and a plan to work with my friends across the aisle to make sure we do this great work it and i yield back the bounds of my time. >> and the gentleman yields back, and that concludes now all time for members of both sides. that we turn to our panel. the chairman of the cftc, mr. gensler, welcome to the panel once again. >> thank you, chairman garrett, ranking member waters, chairman bachus, incoming chair hensarling, for your time and
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the members of the subcommittee. i, too, want to thank all the members that this may be my last time testifying before you, unless you come back to this body, which often happens. and to robert cook, because i think we've all worked so well together on an enormous challenge that was created out of the 2008 crisis. how do we best bring commonsense rules to the road to the best protect the public. two and half years after congress and the president came together, to ensure that swaps markets reform works for the american public, we are here before you, and i just want to address the chairman to say that we have deep respect for this committee and congress. we will ensure and work best to give testimony, and early where we can, which is always are trying to get it full and address all the questions that we think might come up from kevin. some maybe balancing that a little bit to that issue.
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the crisis as we all know that 8 million people out of work, partly due to the unregulated swaps market and yes, as congressman himes said, a very complex market. congress directed the cdc and sec to bring reforms to this market, and given the magnitude of the crisis, congress actually asked us to do it in one year. and they gave us a lot to get as was mentioned, maybe up to 60 rules that were mandated for the cftc and others for the sec. where are we today? two and half years in would have been doing this against the clock. women trying to do a thoughtful and taking into consideration all those costs and benefits, and the nearly 40,000 of the comments that we received in nearly 2000 meetings that we have had. we have completed about 80% of the roles. the marketplace is increasingly moving to implementation, and the results of complete reform central clearing, this kind i
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think on a bipartisan basis, endorsed, will start to be a reality throughout 2013. and faces to 2013. and this fulfills the president commitment of the g20 meeting in pittsburgh in 2009 to have that in place by the end of 2012. this committee, this congress made that happen. transparency has begun with reporting to regulators, but beginning the start of the first of the year it will be to the public as well. if we price and buy for certain interest rate and credit default swap indices, like the indices that were in the midst of the wonderful. and yes, thirdly, swap beautiful begin to register at the end of this month. the cftc has been working to completely these -- complete these reforms in a collaborative way, taking into consideration and seeking broad public input and working with our friends at the sec and international regulars. we also looked at face complaints but we have been significant supporter of facing
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compliance. we want to smooth the transition from an opec, unregulated market to a transparent regulated market place. as chairman bachus said if i can quote you, you want to make it operational, sink together and function. so in the midst of that implementation and its of pasta, it's a natural order of things that many market participants have sought further guidance. sometimes the questions, early. but as all of us know, as we're all in school at one point, sometimes we do our papers late come into the night, the day before it is too. and that's just human nature. we will address questions that come up early, and will do our best to address them even if they come up late. prior to a milestone on october 12 commend this milestone was just because the sec and s. -- the cftc finished the foundatiofoundatio nal definition rules, the definition of swapping swap did and so forth went into effect on october 12.
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we got a lot of those questions, some early, some late. along with my fellow commissioners and staff can we sort through about 20 issues, and i think we sorted through them for the benefit of the public to make it operational, sink together and function it but we also said if you're said if your further question, comment. we've gotten for the questions. we are committed to working through those questions to smooth this transition because it is a significant important. four years after the crisis now, it's time for the public to benefit from this transition, to transparency and lower risk. reforms that hold a similar promise to the 1930s reforms into securities and futures markets i think can contribute to decades of economic growth and innovation. that's what transparency is about. it helps the growth and and our economy. purcellville we are nearly complete we have two important areas i just want to address we still have to finish writing. they have come up already into searing.
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first, find the rules to promote free trade transfers. this is through the trading platforms, the swap execution facilities. and i know you will hear from mr. jean carle live today. we spent a lot of time with. these execution facilities will benefit the public by bringing greater liquidity and competition to the market. buyers and sellers will meet in the marketplace on the most standardized swaps but not the customize button of standardized swaps. the commissioners are reviewing the draft final rules now, and though we had hoped to maybe get them out in december, yesterday or two days ago we provided some additional relief that we'll try to get these out in january or february. and faces men throughout 2013 to give the market time to face this and. second is guidance and face complaints regarding cross-border application of the swaps market reform. congress recognized the basic lessons of modern finance in l.a. crisis in adopting dodd-frank.
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swaps executed offshore by u.s. financial institutions tend to send risks straight back to our shores but it was true it was true with it was a veggie, of lehman brothers, citigroup and bear stearns. and yes, risks here can send things crashing to your. and we certainly did that with a housing crisis, hurting people in europe as well. under the guidance and completed rules, swap getting of more than $8 billion of notional value with u.s. persons would require somebody to register government is abatement will do it at the end of this month. the best to protect taxpayers and promote transparent markets should cover transactions of overseas branches and overseas affiliates guaranteed by u.s. entities. i think failing to do so, if we don't cover somehow the overseas affiliates that are guaranteed back your, not only will be exposed the public to risk like aig, but we would probably send jobs from the u.s. to overseas because our u.s. firms which is send jobs overseas.
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but the risk would still come back here. i think that's a competitive issue. furthermore for foreign firms to register, we are committed to substitute a complex but what does this mean? that means if there's probable and combines a foreign regular requirements that we can look to, let's look to them. for a lot of reasons it's the right thing to do but we're also a small agency, that they underfunded. it's good to look to other regulars. but where's the overseas transacts with the u.s. person back to india's, maybe it's in new jersey or california, but they're transacting back in the u.s., we think on the transaction level there's foreign swap dealers, should come under dodd-frank just like he was affiliated swap the. again, this is consistent with law but it also enables u.s. and overseas firms to compete on a level playing field, rather than u.s. firms coming under dodd-frank, overseas firms not. that would seem that i would not be the right competitive place
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to be. i thank you for this opportunity to testify to did i know iran a little over. i just want to say one last thing. i am so damn proud of the people at the cftc, sir. i know there's going to be many criticisms raised about this agency. that's because this agency is doing something for the american public. the crisis was partly about swaps and 8 million people lost their jobs. and you all i think coming together gave us a half a -- a heckuva task, but it's an important task. the dedicated folks at the cdc are not trying to be quoted as you say world-class regular. they're trying to comply with the law, put it in place, ensure for transparent markets and ensure yes, for a smooth transition. so it's operational, seems together and functions. thank you. >> director cook. >> chairman garrett, ranking member waters and members of the subcommittee, good morning. my name is robert cook. on the director of the security and exchange commission's
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division of trading and markets to thank you for the opportunity to testify today on behalf of the commission regarding title vii of the dodd-frank act. let me begin by talking to chairman singh said about the timing of the testimony, to apologize for that, and to assure you that it was by no means any indication of just a speck. will be happy to address any further concerns in that regard at your convenience. as you know, title vii faces an entirely new regular framework. the sec has authority over security-based swaps, and the cftc has authority over swaps. the vast majority of the products of title vii are within the cftc is jurisdiction. my testimony today will provide an overview of the sec's efforts and for that title vii since chairman schapiro's testimony before the subcommittee in april. in addition, i will discuss the
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commission's efforts to address the implementation of title vii in the cross-border context. since enactment of dodd-frank the sec has proposed a substantial all the rules required by title vii and in some cases has adopted final rules. we continue to work hard to implement the titles provisions. our adoption efforts are focused on the key definition terms in a and the rules relating to clearing infrastructure. in july, the sec acting to do with the cftc a adopted final rules and to rules and to petition for to product definition. this effort also to adoption in april of find rules and interpretation relating to title vii into the definition. although the completion of these two joint rule makings is a significant milestone, in the journey towards full implementation of title vii, the adoption of these to definition the rules did not trigger a requirement to comply with other rules the commission is adopting under title vii. instead, the compliant stage applicable to each final rule will be set forth in the
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adopting release for each such ago, taking into account the scope and complexity of the rules require but. and any other relevant factors known at the time of the adoption. this, we'll be better able to provide for the orderly implementation of the fairest title vii requirements. to that end, the sec issued in june a policy statement subscribing the order in which it expects to require compliance with the commission's final rule, and requesting public comment on that proposed order. the sec's approach aims to avoid a disruption and cost that could result if compliance with all the rules will require simultaneously or haphazardly. the policy statement also emphasizes that the subject to the new regulatory requirements should be given adequate but not excessive time to come into compliance with them. market participants have generally had a positive response to the policy statement on and we're taking their comments into account as we work
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towards completing title vii, the title vii of adoption process. in addition to the key definition a role, the commission is also adopted rules relating to clearing infrastructure. in june, the commission adopted rules that a stylish procedures a certain actions undertaken by clearing agencies, the detail how clearing agencies will provide information to the commission about this security-based agencies plan to accept the clinic, which the commission will then use to aid in determining whether those swaps are required to be clear. the rules also require clearing agencies designated as systemically important for title eight of the dodd-frank act to submit advance notices of changes to the rules, procedures and operations that could materially affect the nature or level of risk of those clearing agencies. in october, the commission adopted a rule that establish standards for how clearing agencies should manage their risks and run their operation. this is designed to help ensure the clearing agencies will be able to fulfill their responsibilities in a
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multi-trillion dollars derivatives market, as was in a more traditional securities market. finally, also in october the commission proposed capital margin and segregation requirements for security-based swap dealers and major security-based swap participant. and next major step in our efforts to into that title vii will be the commission's effort to address the international implications of title vii in a single holistic proposal. our cross-border approaches been informed by discussions with fellow regulars and other jurisdictions, and we are paying close attention to the comments on the cds proposed guidance. in part the purpose of the publication of a single proposal addressing the international application of the title vii across the full range of greg george categories and transition requirements is to give investors market participants, for regulars and other interested parties opportunity to consider our approach as an integrated whole. the cross-border relief will
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provide notice and comment rulemaking on intrepidity items, as a rulemaking proposal the proposal the release will incorporate a economic requirement, but consider the effects of the proposal on efficiency, competition and capital formation. although a rulemaking approach takes more time, we believe there are a number benefits that will make this approach work -- worth the effort including a four gigabytes of the rationale for an economic consequence of a particular approaches and consideration of reasonable alternatives. in conclusion as we continue to intimate title vii we look for to contingent work closely with congress, fellow bravest both at home and abroad and members of the public. thank you for the gee to share our progress in current thinking on the application of title vii. i will be happy to answer your questions. spent and i think you, director cook. and so than at this time we turn to questioning. and i will recognize that sell for five minutes. so it's christmastime coming up. and i'm in the process of trying to buy some gifts.
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for the family, and i won't say what i have bought, but i will just lay out what i'd done to try to achieve that. to do that. one is, i went online and i bought some stuff out from texas. so ask chairman gensler, would you say what about those packages from my kitchen taxes online, was at the interstate commerce i was engaged in? >> i'm not sure where the question is going from but i think -- it's good for jumper sure, and is probably interstate commerce for sure. >> i bought some of bought some other things to mission through one of the catalogs, mail catalogs, and would you say when i do that that was also through a means of interstate commerce? >> again, i hope your children are happy with the gas. >> they don't ask for much. they're good kids. and lastly one of them i had to go up and call the company out
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in california and buy their gifts. would you say that that was a means of interstate commerce that i did with in? >> if i understand the question whether you think a telephone, using a telephone, online, and the mr. bennett third means in there, are the means of interstate commerce, i think i stand that they are. even carrier pigeons might be a means of interstate commerce. >> so that seems pretty clear to us, and it was pretty clear to congress when we put into language in the means of interstate commerce would be appropriate and allowable under seven. but it seems as though the commission come hard-working staff i agree, with you all, are having difficulty in defining that. and that now i understand that the commission is considering reviving the rules that will run from the last one which was the
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voice, telephone. that's correct, right? you are revising it to include voice, but you're using language, not an actual role to do so. you are doing so in the preamble. so question is, if it's so clear to both of us right here that these or any means of interstate commerce, why isn't it clear to the commission and why is this one little area -- [inaudible] >> just to bring it back to basics, what congress asked us to do, both agencies, is to ensure our greater competition where buyers and sellers meet in a transparent market place, through swap execution facilities. by facilities. by any means of interstate commerce in the statute, we've got a lot of comments. they were good comments on our proposal that we have to ensure that we are technology neutral. whether its telephone, internet and these three means. and that's what's being considered by the commission right now. >> okay.
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spent so i will close on this but it seems that all three are interested, and they should be able to resolve quickly. moving onto the processor but i see a different process between the agency and the acc a source handling some of these things. for example, with cross-border applications, when agency is doing former rulemaking process and the other agency is doing more, and, therefore, with cost-benefit analysis but the other agency is doing not so much with rulemaking, formal process instead of doing it for guidance and missing what congress intended which is cost-benefit analysis. in one area you are in the process of creating -- correct, the agencies in the process of defining the definition of what you as person is as opposed to a non-us person? >> it is included in an extended order that i should also has -- >> by pixel in the sec did this
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they went to the regulation, as i understand, to do so. what nctc misses and as for guidance. this was a letter that i think our office into yours asking for why you going through guidance on some of these things as opposed with the sec is doing, i was a more thoughtful, more compliant with congress' intent in going through a formal ruling process. so why are you doing it, and we anticipate and answer to our letter back from this summer's? >> congress included in title vii something for the ctc that was not included for the sec. there's a specific provision for cross-border application, and swaps, not security basics swaps. it is section 727. we got a lot of questions in a rulemaking. we put out a 55 proposals, all with cost benefits. as we finalize rules. we're doing, and benefiting from cost-benefit on all of those, i people ask, can you interpret these words, make a legal interpretation of these words in 720 2g, and we put that out for
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public comment and notice and we're benefiting from public comment as well. >> so you can do that for a rulemaking process as opposed to guidance seeking advice? >> there's a number of pit place in this by the fourth of fifth place that we address to interpretation. it was referred to earlier in the indemnification area is another area for swap data repositories. we used. people ask is can you interpret words, and we're trying to do that. >> do you think these can all be done and it may be asking the agencies for them? i'm sure the sec was being asked for some of these competitions as well. i applaud what the sec did. with a, i did not to the gentlelady yield from california for five minutes. >> thank you very much, mr. chairman. i want to get back to some more discussion on extra torque to
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reality. section 722-d, we've given latitude and flexibility in terms of how you would regulate swaps across national borders. in june the ctc releases interpretive guidance on the cross-border application of title vii of the wall street reform act. therefore, subject to the entity and transaction level requirements of dodd-frank, many of the industry have expressed concern that non-us entities have been stopping business with guaranteed subsidiaries of u.s. firms overseas. others have even suggested that the guidance -- subsidiaries overseas simply to avoid our u.s. derivatives reforms. at the same time we certainly don't want on but it risked a
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crank and offshore branch of a subsidiaries of u.s. firms to come back to to get sick. so chairman gensler, how are you reconciling these competing concerns giving the other parts of the globe is still behind us in terms of derivatives reform? >> an excellent question, and it is a matter of balance. the overseas affiliates guaranteed bacteria can send risk back to, ma and so i think congress included 722 to ensure that risk didn't blowback as it did in aig and lehman and bear stearns and others. but what we said is for those offshore guaranteed affiliates, substitute compliance can be the way to move forward. foreign regulators that are comparable and consistent, that's okay with us. and we are also saying we are not going to have any of those rules coming for some time. the only rules to coming on january 1 is if the dealer is
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dealing with u.s. persons which is more of a territorial u.s. person, not the guaranteed affiliates. and we're saying until next summer, let's continue to work with the other overseas regulators to sort through. so, narrow u.s. person will come into place early, say january 1, a guaranteed affiliates, we are dealing that, face compliance as well as substituted compliance. >> thank you. mr. cook, can you weigh in on the question also? >> sure, thank you. the commission has not yet issued its cross-border guidance. it's in the front of the 10 a force in terms of implementation of title vii. i do believe that what the task at hand is to try to strike the right balance between, on the one hand achieving our domestic regulatory priorities, and the other, recognizing that this is a global marketplace and that we need to understand that what we
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do here will impact what the other regulators and other jurisdictions do. i would point to a statement that we feel he was issued by a number of the leaders of different regulatory agencies around the world, as a result of a meeting earlier, at the end of november. we are there's a discussion about how to best achieve international coordination consensus, and as part of an ongoing dialogue that a think we will incorporate into her cross-border relief and tried to take that into account at that point. >> finally, let me just remind everybody that the president's request for the cftc and sec is 308 million, and 1.566 billion, respectively. however, the house appropriations committee has passed a bill appropriate only 180,000,001.371 billion for your agencies. tell me how this funding level will affect ongoing operation of a special as it special as impact on application and enforcement of title vii.
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do your counterparts overseas face similar shortcomings because the ctc as an underfunded agency. we're about 10% larger than we were 20 years ago. and the futures market we were see has grown fivefold. and congress has asked us of course to take on this important task in the swaps market. we won't be able to address everybody's questions. there will be gaps in our oversight. >> and mr. cook, we are very concerned about the sec. it looks as though you is if you're looking -- losing people over the. what's going on? how do you do with the question of a lack of adequate funding? >> thank you. i think those challenges particularly in the implementation phase to writing the rules, less people, resource and and said, however then ultimately overseeing examining and bring enforcement actions to enforce the new regime. so i think as the progress moves
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forward, the challenges will become greater because there's a wide range of new types of market participants and new types of transactions that are coming within this regulatory framework, and there needs to be strong and effective enforcement around it to make it meaningful spent thank you very much, and i yield back. >> the gentlelady yield's back. >> thank you, mr. chairman. they are tsutsumi different questions here to run through. i just come because you touched on it and wasn't going to be one of my original questions, indemnification of depository. why not do a full rule set? >> indemnification of data repositories? >> correct speed we did an interpretation to try to interpret it so that foreign regulators could

U.S. Senate
CSPAN December 14, 2012 9:00am-12:00pm EST


TOPIC FREQUENCY Us 42, U.s. 42, Sec 17, U.n. 12, Drc 10, United Nations 7, Washington 7, Aig 6, Mr. Prendergast 6, Eastern Congo 6, Uganda 6, California 6, Congo 6, Mr. Gensler 5, Carson 5, Mr. Cook 5, Africa 5, America 5, London 5, Cftc 5
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